The Madras High Court has set aside a Customs Department order rejecting an Integrated Goods and Services Tax (IGST) refund solely on the ground that the exporter had claimed a higher rate of duty drawback.
The bench of Justice Hemant Chandangoudar directed the Customs department to reconsider the refund claim in accordance with law after taking into account binding judicial precedents that had already invalidated the circular relied upon by the department.
A writ petition was filed challenging the rejection of an IGST refund claim amounting to ₹1,15,54,943. The petitioner had also sought interest on the delayed refund after making necessary amendments to the shipping bills.
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The dispute arose after the Customs Department rejected the exporter’s IGST refund application by invoking CBIC Circular No. 37/2018 dated October 9, 2018. According to the department, the exporter had suffixed the letter “A” to the drawback scheme code in the shipping bills, indicating an intention to avail the higher rate of duty drawback.
The Customs authorities stated that the computerized IGST refund processing module contains inbuilt validations, and once a higher rate of drawback is claimed, the system does not permit processing of the IGST refund. On this basis, the refund application was rejected.
The petitioner contended that the very circular relied upon by the Customs authorities had already been declared invalid by the Gujarat High Court in Amit Cotton Industries v. Principal Commissioner of Customs. The petitioner further pointed out that the Madras High Court had followed the same principle in an earlier writ petition, and the Division Bench had also adopted the same view in M/s. Precot Meridian Limited v. Commissioner of Customs.
It was argued that the circular was inconsistent with the statutory provisions governing IGST refunds and therefore could not be used as a basis for denying the refund.
After considering the submissions, the High Court observed that the issue was already covered by earlier judicial pronouncements. Since the circular forming the basis of the rejection had been held to be inconsistent with the statutory framework governing IGST refunds, the Court concluded that the impugned order could not be sustained.
Accordingly, the Court set aside the Customs Department’s proceedings dated September 9, 2022.
The High Court directed the third respondent to reconsider the petitioner’s claim for IGST refund afresh in accordance with the applicable statutory provisions, rules, and the judicial precedents referred to in the judgment. The authority has also been directed to provide the petitioner with a reasonable opportunity of hearing before passing a fresh order.
The Court ordered that the entire exercise be completed within four weeks from the date of receipt of the judgment.
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